Bank of Montreal announced January 26, 2026 its transition from AIR MILES to a new in-house loyalty program, a shift analysts project will cut AIR MILES' market share in Canadian loyalty programs by 15-25% through 2027.
Diversified Royalty Corp owns AIR MILES Reward Program through AM Royalties Limited Partnership. BMO serves dual roles as both an AIR MILES customer and guarantor of the partnership, making this departure financially material. The bank's exit removes a major transaction generator from a royalty-based revenue model.
The timing coincides with multiple partnership amendments and contract awards filed January 26, suggesting accelerated contract restructuring. These filings indicate AIR MILES is renegotiating relationships as it faces losing one of Canada's five largest banks.
Loyalty program economics depend on transaction volume. When major partners exit, remaining partners must compensate for lost activity or the program faces margin compression. AIR MILES collects royalties on transactions flowing through its network—fewer BMO credit card swipes and banking interactions mean lower royalty payments to Diversified Royalty Corp.
Canadian loyalty program consolidation has accelerated since 2020. Banks increasingly prefer proprietary programs that capture 100% of customer data and avoid sharing economics with third-party platforms. BMO's move follows a pattern where financial institutions calculate that direct customer relationships justify the cost of building loyalty infrastructure.
Diversified Royalty Corp investors should monitor Q1-Q4 2026 earnings for AIR MILES segment performance. Key metrics include program enrollment trends, redemption volumes, and revenue per active member. The company must disclose material changes to partnership agreements that affect royalty calculations.
The loyalty program market shows clear bifurcation: large financial institutions building proprietary systems versus retailers and smaller banks relying on established platforms like AIR MILES. BMO's departure tests whether multi-sponsor programs can maintain economics when anchor partners leave.
Air Miles Loyalty Inc operates the program infrastructure while AM Royalties Limited Partnership holds the intellectual property generating royalty streams. This structure means Diversified Royalty Corp faces revenue pressure without operational control over member retention strategies.
Quarterly tracking of BMO customer migration rates to the new program will determine whether the 15-25% revenue impact estimate holds. Fast migration accelerates AIR MILES revenue decline; slow migration provides time to replace lost volume with new partnerships.